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Palladium jumped above the US$1,500-an-ounce mark for the first time on Wednesday, propelled by a stark supply deficit, while gold hit a 10-month high on a weaker dollar as investors awaited cues on U.S. monetary policy.

Spot palladium, which traded as high as US$1,502 an ounce, was up 0.5 at US$1,487.47.

“Palladium’s deficit is likely to persist for at least the next couple of years and there’s limited opportunity to ease the market’s tightness,” said Suki Cooper, precious-metals analyst at Standard Chartered Bank.

Leading autocatalyst manufacturer Johnson Matthey said last week that a persistent supply deficit in the palladium market was likely to widen this year.

Tighter emissions legislation means “palladium loadings continue to rise, offsetting weakness we’ve seen in auto sales,” Ms. Cooper said. “Demand remains strong and we haven’t seen an increase in mine outputs.”

Further, a broad-based substitution from palladium to platinum was not immediately feasible, analysts said.

While both metals are primarily consumed by car makers in catalytic converter manufacturing, platinum is more heavily used in diesel vehicles that have fallen out of favor since the Volkswagen emissions-rigging scandal broke in 2015.

Unlike platinum, palladium has also benefited from a switch to petrol engines and expectations for growth in hybrid electric vehicles, which tend to be partly gasoline-powered, helping cushion the metal from falling global car sales.

Indicative of the bullish sentiment, net long positions in palladium have jumped since last August, with prices rising about 80 percent during the same period.

Meanwhile, spot gold rose 0.3 per cent to US$1,344.76 an ounce, having earlier hit its highest since April 19, 2018, at US$1,346.73.

U.S. gold futures rose 0.3 per cent at US$1,348.1.

Investors were awaiting minutes from the U.S. Federal Reserve’s last meeting later in the day for a confirmation on the central bank’s dovish position, analysts said.

Higher rates tend to weigh on non-yielding gold.

The dollar was at a two-week low against major currencies ahead of the release of the Fed minutes and amid hopes for a U.S.-China trade truce.

“Although it’s likely the Fed minutes will continue to show a dovish/neutral stand and that should cap further dollar strength, the other central banks are certainly in the same mindset if not even more dovish,” Peter Hug, global trading director at Kitco Metals, said in a note.

Helping the case for gold, considered a safe store of value during political and economic uncertainty, was a gloomy outlook for global growth, prompting central banks to go slow on monetary tightening.

Meanwhile, spot platinum climbed 1.4 per cent to US$829.05 an ounce, and silver gained 0.8 per cent to US$16.11.

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